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Exam 21: International Corporate Finance

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Question 111

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Provide a definition for counterparty.

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Second borrower in c...

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Question 112

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The Import House placed an order today for one million Thai baht of furniture from Thailand. The furniture will be delivered and paid for one year from today. The spot price of the baht is 44.15. The annual inflation rate in Canada is 3% while the inflation rate in Thailand is 10%. The Import House elects to accept all of the exchange rate risk. How much should The Import House expect to pay for the shipment of furniture when it arrives?

A) $20,349
B) $21,168
C) $22,650
D) $22,708
E) $23,173

F) A) and E)
G) A) and D)

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Question 113

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Provide a definition for forward exchange rate.

If absolute purchasing power parity is said to hold for some good, then it must be true that there are no significant barriers to trading the good.

Peter discovered an arbitrage opportunity based on the following exchange rates: $1US = EUR 1.1257 $1US = $\le$ .6928 1 $\le$ = EUR 1.65 If you start with $1, how much of a profit can you earn in U.S. dollars by exchanging currencies given these rates?

In the spot market, $1 is currently equal to $\le$ .5086. The expected inflation rate in the U.K. is 3 % and in the U.S. 4 %. What is the expected exchange rate three years from now if relative purchasing power parity exists?

Provide a definition for Eurocurrency.

The four primary currencies that are traded in the foreign exchange market are the U.S. dollar, the British pound, the Canadian dollar, and the Euro.

You have an opportunity to buy 250 Canadian dollars with 100 British pounds. Which one of the following statements is correct given the following exchange rates? Assume you start out with 100 British pounds.

Harris International has operations in three countries. When the accountants value the inventory for financial statement purposes, they often find that the value of the fixed assets in dollars has changed even though the actual assets have not changed since the prior accounting period. This is an example of ______ exposure to exchange rate risk.

Canadian Treasury bills are yielding 2.6% and the annual inflation rate in Canada is 1.8%. What is the inflation rate in Japan if the short-term government bonds in Japan are yielding 1.2%?

How many U.S. dollars can you buy with 1,000 Hong Kong dollars?

A car in Brazil costs 153,636 Real. How expensive is the car in Canadian dollars?

According to this morning's The National Post, you can exchange $1 CDN for $.93 U.S. today. Thus, the ________ is $.93 Canadian.

The spot rate for the Japanese yen currently is *117 per $1. The one-year forward rate is *116 per $1. A risk-free asset in Japan is currently earning 4 %. If interest rate parity holds, what rate can you earn on a one-year risk-free Canadian security?

Which one of the following formulas expresses the absolute purchasing power parity relationship between the Canadian dollar and the British pound?

Explain the methodology of both the home and the foreign currency approaches to analyzing the net present value of a project which has cash flows in a foreign currency.

The foreign currency approach to capital budgeting analysis computes the net present value of a project in both the foreign and in the domestic currency.

If absolute purchasing power parity is said to hold for some good, then it must be true that the good in question is standardized, and virtually identical in the markets being considered.

You want to import $175,000 worth of rugs from India. How many rupees will you need to pay for this purchase if one rupee is worth $0.0229?